The Top 11 of 2011

A rundown of our top eleven IP & Technology stories of 2011:

ICANN's Move to Allow For New Domain Names

On 20 June, the Internet Corporation for Assigned Numbers and Names (ICANN), the organisation that oversees Internet domain names, voted overwhelmingly in favour of one of the biggest changes in the web’s history, allowing a major expansion in the range of web suffixes available for registration.

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Clarification of ISP responsibility for Internet File Sharing

The ECJ has, in a judgment released today (Scarlet Extended SA (“Scarlet”) v Societe belge des auteurs, compositeurs et editeurs (“SABAM”), Case C-70/10), indicated that an order requiring a Belgian internet service provider to filter certain peer to peer files is not permissible under EU law.

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Ireland Implements New E-Privacy Laws on the Use of Web Cookies

Ireland has transposed the new E-Privacy Directive 2009/136/EC. The Directive amends the E-Privacy Directive 2002/58/EC and has attracted much attention due to the new rules it imposes in relation to the use of internet cookies.

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Challenges facing the Copyright Review Process

I have been mulling over the review of Irish copyright law recently announced by the Minister for Jobs, Enterprise and Innovation Richard Bruton. This is a commendable initiative and it is reassuring to see that that it has been staffed by a review committee (chaired by Dr. Eoin O’Dell, a lecturer at Trinity College Dublin and blogger) with expertise in the copyright field.

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Data Protection - The Article 29 Working Party issues Opinion on the definition of "consent"

The EU's Article 29 Working Party has issued an Opinion on the definition of "consent" in which it examines the individual elements and requirements for consent to be valid under the Data Protection Directive (95/46/EC) and the e-Privacy Directive (2002/58/EC). The Opinion also includes recommendations for improving the concept of consent in the context of the ongoing review of the Data Protection Directive.

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BRENNANS - CONFUSING BROWN BREAD!

For the later part of this year, I have been watching with great interest (partly due to a fondness for the subject matter) the passing off case involving bread makers McCambridge’s and Brennans. McCambridge’s sued Brennans claiming deliberate copying of its brown bread packaging which would cause confusion within the market.

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CJEU Rules that Unified Patent Litigation System is Incompatible with EU Treaties

You might recall that last April we wrote about the long awaited opinion from the Court of Justice of the European Union (CJEU) on the European Council’s draft agreement establishing a new European and Community Patent Court (Patent Court). That opinion was finally issued in March with the CJEC ruling that the draft international agreement put forward by the Council is incompatible with EU Treaties.

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Reform of the EU's Data Protection Directive expected in early 2012

The Vice President of the European Commission and EU Justice Commissioner, Viviane Reding, recently issued a statement regarding the proposed reform of the Data Protection Directive (95/46/EC), indicating the proposal will be published in early 2012.

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Copyright in Sound Recordings Extended to 70 Years

A new EU Directive extending the term of copyright protection in sound recordings from 50 years to 70 years has been recently passed. The ultimate aim of the new Directive is to help bridge the gap between the level of copyright protection given to authors and composers (70 years after their death) and that previously afforded to performers (50 years after the date of the initial performance). Colloquially it has been referred to as “Cliff Richard’s Law” because of this promise to ensure veteran rockers continue to earn royalties into their old age.

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Clarification from the ECJ on IP Infringement Control in E-Commerce

A recent ruling by the European Court of Justice (ECJ) on 12 July 2011 in the L'Oreal v. eBay case is an interesting one as it goes some way toward clarifying the law with regard to IP infringement control in the area of e-commerce.

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Report on Data Breach Notifications in the EU

The E-Privacy Directive (2009/136/EC), which formed part of the EU telecommunications regulation reform package passed in November 2009, makes it mandatory for public communications providers (i.e. ISPs and telcos) to inform national authorities of any data security breaches. Member States have until 25 May 2011 to transpose this Directive.

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Commission Invites Views on Technology Transfer Regulations

The Commission has invited interested parties to make submissions to it regarding EU competition law rules for the assessment of technology transfer agreements, i.e. patent, know-how and software licensing. The current regime consists of a block exemption regulation ("TTBER") that create a safe harbour for certain agreements, as well as on the assessment of agreements that fall outside the TTBER. The current TTBER exempts certain agreements that are considered to be non-problematic from a competition law perspective under European law. To qualify for an exemption, agreements need (i) to produce positive effects which outweigh the restrictions inherent in the agreement and (ii) be concluded either between rivals who have less than 20% market share or between non-competitors who have less than 30% market share. The TTBER also defines certain hardcore restrictions, which never qualify for an exemption, such as fixing of prices charged to third parties.

The current TTBER will expire in April 2014 and the Commission is seeking input on the proposal for assessing technology transfer agreements after this date.

The Commission has published a questionnaire to facilitate initial engagement with relevant interested parties.  It is crucial that Irish industry players, particularly in the technology and pharmaceutical sectors, engage in this process in order to ensure their interests are represented at a European level and in order to share their unique experiences in the technology transfer arena.

Social Media Contracts

A recent decision (Ardis Health LLC et al. v. Nankivell)of the U.S. District Court for the Southern District of New York dated 19 October 2011, provides a good insight into the best practices for parties contracting in the social media space.

 

“Social media” refers to any online medium that includes community features such as user-generated content, the ability to form groups and the ability to recommend, comment on, and share the content of others. Examples include Facebook and Twitter.

The plaintiffs in the proceedings were three companies that market online herbal and beauty products. The three plaintiffs are wholly owned and collaboratively operated by Jordan Finger. The defendant was hired by one of the plaintiffs, CYC, as a “Video and Social Media Producer”. The defendant signed a Work Product Agreement that provides that work created and developed by the defendant “shall be the sole and exclusive property of CYC, in whatever stage of development or completion”, and that it ”will be prepared as ‘work-for-hire’ within the meaning of the Copyright Act”. The agreement also provided that the defendant return all confidential information to the plaintiffs upon request, and that “actual or threatened breach of the agreement will cause irreparable injury and damage”.

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Jurisdiction for Online Defamation Cases - ECJ Clarification

Two recent cases which were jointly heard before the Court of Justice (Joined Cases C-509/09 and C-161/10 - eDate Advertising GmbH v X and Olivier Martinez, Robert Martinez v MGN Limited), have resulted in a useful clarification of the law in relation to jurisdiction in circumstances where allegations of defamation have been levelled against a party who operates an online publication. The Court considered the wording of Council Regulation (EC) 44/2001 and, in particular, it was asked to clarify the meaning of Article 3(2) of the Regulation which provides that;

A person domiciled in a Member State may, in an other Member State, be sued in matters relating to a tort, delict, or quasi-delict, in the courts for the place where the harmful event occurred or may occur”.

The Court held that a person who alleges that a defamatory statement has been made on the internet “may bring an action in one forum in respect of all of the damage caused, depending on the place in which the damage caused in the European Union by that infringement occurred.”

The Court also acknowledged that “Given that the impact which material placed online is liable to have on an individual’s personality rights might best be assessed by the court of the place where the alleged victim has his centre of interests, the attribution of jurisdiction to that court corresponds to the objective of the sound administration of justice.”

This is a welcome clarification of the issue of jurisdiction as it relates to cases involving alleged online reputational damage.

Data Protection - The Article 29 Working Party issues Opinion on the definition of "consent"

The EU's Article 29 Working Party has issued an Opinion on the definition of "consent" in which it examines the individual elements and requirements for consent to be valid under the Data Protection Directive (95/46/EC) and the e-Privacy Directive (2002/58/EC). The Opinion also includes recommendations for improving the concept of consent in the context of the ongoing review of the Data Protection Directive.

The Opinion provides practical examples of valid and invalid consent, and analyses the meaning of key concepts such as "freely given", "specific", “informed", “explicit”, and "unambiguous". The Opinion further clarifies some aspects relating to the notion of consent, such as the timing as to when consent must be obtained and how the right to object differs from consent.

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Lightning Strikes the Clouds

The recent reports of a lightning strike at Dublin data centres illustrates the importance of giving close consideration to the contractual consequences of such unplanned events. This is particularly so where the cloud platforms are essential to run business critical activity such as sales or finance and accounting functions.
 
With cloud services, customers first need to decide what business critical activity can be 'cloud dependent' bearing in mind the risks. They then need to consider the extent to which they mitigate the risk of a single point of failure at the supplier end by keeping some disaster recovery and back-up in house. Arguably the more they keep in-house, the less financial benefits they will get from cloud services. In some cases though, it will be a price worth paying.
 
When lightning strikes, two key issues arise:
 
(a) business continuity - what is the supplier obliged to do to avoid business interruption to the customer? and
 
(b) data risk - if systems are down, can data be lost forever or simply rendered unavailable but always restorable and how is related liability and financial risk shared between supplier and customer?
 
To offer real benefits, the contract should have sufficient remedies, built into the agreed price, which mean that termination, supplier switching and in the worst case, threats of legal claims (all of which can involve major business interruption) are options of the very last resort. One example is service credits. But be alert to the steps required in order to qualify for credits and whether credits are in effect the only financial remedy. Another is a clear obligation to implement a disaster plan and data retrieval services, including in particular for force majeure events. But be alert to confirming that these are in scope and their associated cost.
 
Contract discussions should analyse exactly how the service will operate and work through the practical consequences of unforeseen events such as a lightning strike.
Often the obligation to meet a particular service level (and liability to pay credits) will not apply where the unavailability is caused due to force majeure events such as lightning strikes. But query whether the contract effectively suspends any obligation to provide any service, including disaster related service.
 
Many buildings (even domestic dwellings) are designed to include lightning protection systems. Asking a cloud provider if it has such physical protections in place is good due diligence.
 
On the face of it, a force majeure clause ensures a party is not liable for its resulting failure to perform the contract. With business critical IT contracts, that is where the discussion should start, not finish.
 
 

Monitoring online newspapers: who needs a licence?

Anyone who clicks on a link and reads an article on an aggregator or media monitoring website in a commercial setting may infringe copyright unless licensed by the publisher, according to a UK Court of Appeal Judgement dated 27 July 2011 in the NLA v PRCA/ Meltwater case.

In 2009, the Newspaper Licensing Agency (NLA), representing most UK newspapers, introduced a compulsory licensing regime for aggregators and media monitoring firms that use content from its members’ websites (newspapers).

Meltwater, a company providing online media monitoring services, agreed to purchase a licence for itself as a monitoring company under this new regime, but did not agree that its customers (PR Agencies) should have a licence too in order to use Meltwater’s services.

The Meltwater News Service consists of Meltwater sending its customers reports of articles, which include the headline of the article, the opening words of the article and an extract showing the context in which the chosen search term appears.

The Court of Appeal was asked to decide if members of the Public Relations Consultants Association (“PRCA”), a professional body that represents UK PR consultancies, in-house communications teams and PR freelancers, require a web end-user copyright licence in order to lawfully receive and/or use online media monitoring services from Meltwater.

The Court of Appeal ruled that the members of the PRCA, receiving these reports, need a copyright licence to ensure that they are not infringing copyright. The Court ruled that headlines are capable of being original literary works and that extracts containing opening words can be a substantial part of an original literary work. Moreover, the Court ruled that the technological process of displaying a webpage on a computer is not a “temporary copy” exempt from copyright.

This decision is likely to have an impact on all websites that provide a news aggregator or media monitoring service and could necessitate major changes in the business models of these websites.
 

ICANN's Move to Allow For New Domain Names

On 20 June, the Internet Corporation for Assigned Numbers and Names (ICANN), the organisation that oversees Internet domain names, voted overwhelmingly in favour of one of the biggest changes in the web’s history, allowing a major expansion in the range of web suffixes available for registration.

Under the new naming system, businesses, organisations and governments will not be confined to the existing list of 22 generic Top Level Domains (gTLDs) that include ‘.com’, ‘.net’ and ‘.org’ when they apply to register a domain name. The proposal is that domain names suffixes will now be available in almost any word in any language, that is, nearly any word up to 63 characters in length.

It is thought that the new system will be particularly attractive to companies as it will give them the opportunity to take greater control of their branding. A number of international companies have already expressed their intention to create their own branded web suffixes such as Canon, Deloitte and Hitachi.

The idea behind the change is that organisations around the globe will be able to market their brand, community or cause in new and innovative ways. Rod Beckstorm, president of ICANN, spoke of this latest development in terms of “unleashing the global human imagination” and expressed hope that “this allows the domain name system to better serve all of mankind.”

From a global trade mark perspective, the new gTLDs have the potential to be both a blessing and a curse to companies. New web suffixes will give companies the opportunity to reinforce their brand names in new ways, but at the same time may result in an increase in legal actions required to defend trademarks. ICANN’s latest proposal has not therefore been without opposition, with many large companies expressing concern that they may be forced to spend millions registering their brand names simply to protect their intellectual property.

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UK Government's Latest Reports on the G-Cloud Published

In response to a Freedom of Information Act request the UK Cabinet Office has this month published its latest ("Phase 2") reports on the G-Cloud Programme. The G-Cloud Programme sets out to define how the public sector could utilise the cloud computing approach to ICT delivery and to explore what benefits and challenges this approach creates. The G-Cloud Programme is a core element of the UK Government's ICT Strategy and is an enabler of cost savings targets for the 2011-2014 period, as well as other government objectives such as enhanced public services, improved data centre services and the green agenda.

It is envisaged that the G-Cloud will provide a variety of managed, common, utility and custom services for public sector organisations through a dedicated private cloud and trusted public clouds. Public sector organisations would be expected to use G-Cloud services as their first choice where available and where they fit their business needs. This will be a significant change from today's ICT landscape across the public sector as organisations will no longer procure and own the end-to-end ICT lifecycle for their services. It is hoped this this will drive efficiency and value through standardisation, sharing and re-use of services, as well as providing a route for rapid access to a portfolio of G-Cloud services.

Proposals under consideration by the UK Cabinet Office include the creation of a central G-Cloud authority to measure the merits of competing technology standards. This central authority would have as a primary objective the ability to impose technological, commercial and security standards on the public sector and its suppliers to create the equal opportunity necessary for G-Cloud to operate efficiently. The G-Cloud Programme also envisages an Applications Store for Government (ASG) being implemented to provide the public sector with an ICT marketplace to readily source, share and promote ICT services. The ASG would be a single online retail website for Public Sector organisations to use when purchasing ICT services. The proposals seek to avoid ‘lock in’ to a particular infrastructure provider by ensuring there will be a choice of at least two infrastructure providers for each application, and that public sector purchasers should be able to transfer their chosen application service to another infrastructure provider if required at some future point. In parallel to the development of G-Cloud services and the ASG, it is hoped that a cross public sector rationalisation, virtualisation and consolidation exercise will deliver a reduction in data centres (with the first tranche of data centre consolidation targeted by August 2011).  

The UK Cabinet Office is due to publish a formal G-Cloud proposal in March as part of the government's overall ICT strategy. ICT suppliers doing business with the UK public sector (in Northern Ireland and elsewhere) will be awaiting further developments with interest. The UK Cabinet Office's recently published Phase 2 reports on the G-Cloud Programme are available here.

New Working Party Opinion Relevant to Cloud and Social Network Providers

On 16 December 2010, the collective of EU data protection authorities, the Article 29 Data Protection Working Party, adopted “Opinion 8/2010 on applicable law”. The Opinion (which while not legally binding is important guidance on how to apply EU data protection law) seeks to clarify the scope of application of the EU Data Protection Directive 95/46/EC.

Recent developments in technology solutions are presenting challenges to the existing data protection framework. This Opinion is therefore timely and it contains numerous references to cloud computing and social networking. There are clear signs that legislative change (in the mid to longer term) to deal with these developments is inevitable.

The Opinion gives useful case examples for multinational businesses of how data protection law should be applied and in doing so acknowledges the, sometimes significant, practical burden that the application of current data protection law can present for multinational businesses.

There is some confusion amongst cloud providers and customers alike about what data protection laws will apply. This Opinion clarifies that the place where data are sent or located (and the nationality or place of residence of data subjects) does not determine applicability of data protection law. What is required is an analysis of the corporate context in which the processing is carried out. 

As the market for cloud solutions develop, the sophistication of cloud provider contracts will increase. Knowing where the data protection ‘buck stops’ is key. Similar considerations apply in the social networking sphere where increasingly companies are using social media as a customer facing business tool. This Opinion highlights that in the cloud, both the user and the provider of the cloud service can be a data controller. Cloud computing contracts should reflect this and allocate responsibility accordingly.

The Vagaries of Exiting a Long Term Technology Outsourcing Deal

A recent judgment delivered in October this year by the English High Court (Technology & Construction Court) in the case of Ericsson Limited and Hutchinson 3G UK Limited illustrates:
 
 

(i)                   the importance of giving careful consideration to the financial and legal  consequences of contract termination or expiry and the extent of the parties responsibilities to each other on exit;

(ii)                 the need to invest the same degree of commercial and legal consideration into drafting contract amendments as tends to be invested in the original deal;

(iii)                the risks inherent in treating the ‘front end’ legal terms and conditions and the schedules of a contract in isolation.


It can be speculative and, to an extent, counter intuitive to focus on the end of a commercial relationship at the outset but it can be costly not to. Investing resource in proactive management of contractual rights and careful management of contract amendments is also money well spent.

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TCD-UCD Innovation Academy - A Step Towards A Smart Economy

On Friday 19 November, the Innovation Academy, which is the educational centrepiece of the TCD-UCD Innovation Alliance, was officially opened. The Academy's mission is to develop "a new breed of creative graduate, expert in their discipline, but with a thorough understanding of how innovation can rapidly convert knowledge, ideas and inventions into products, services and policies for economic and social benefit".

33 PhD students from TCD and UCD enrolled in the Academy in September and are currently taking modules towards the joint TCD-UCD Certificate in Innovation and Entrepreneurship.

The Innovation Alliance was formed by the two universities last year as part of the national initiative to create a Smart Economy, and it is said that the Academy will play a central role in developing Ireland as a global hub for innovation.

Commission Launches Public Consultation on the Future of E-Commerce

The EC Commission has launched this month a public consultation on the future of electronic commerce in the internal market, and the implementation of the Directive on electronic commerce (2000/31/EC) (the Directive).

The Commission wishes to undertake the consultation for two reasons namely, it wishes to study the many reasons for the limited takeoff of e-commerce in the EU and to evaluate the implementation of the Directive.

All interested parties are required to submit their responses to the questionnaire by 15 October 2010. The Commission has specified target groups from whom comments would be particularly welcome, for example Ministries responsible for various aspects of e-commerce; economic operators of the information society; the regulated professions – pharmacists, lawyers and magistrates; consumers and consumer associations; and rightsholders and organisations representing them.

The Commission is seeking the views of interested parties on the following subjects:

  • the level of development of information society services;
  • issues concerning the application of Article 3(4) of the Directive by Member States – which concerns Member States’ ability to take measures to derogate from the general principle that Member States must not restrict the freedom to provide information society services from another Member State;
  • contractual restrictions on cross-border online sales;
  • cross-border online commercial communications, in particular by the regulated professions;
  • the development of online press services;
  • the interpretation of the provisions of the Directive concerning the liability of intermediary information society service providers;
  • the development of on-line pharmacies; and
  • the resolution of on-line disputes.

The questionnaire is available online here.

Possible Changes Ahead for Cookies Notifications

The Article 29 Data Protection Working Party recently published an Opinion clarifying new EU rules concerning the use of cookies and similar devices.

The Working Party considers that prior opt-in mechanisms requiring an affirmative action by website users to indicate their willingness to receive cookies or similar devices would be "more in line" with the requirement to obtain informed consent as required under Article 5(3) of the ePrivacy Directive.  Up until now, website users have typically been notified about cookies by means of privacy statements and online terms and conditions. Due to the “affirmative action” referred to in the Opinion, it would appear that these mechanisms may no longer be sufficient.

The legislation in question (which is the revised ePrivacy Directive) must be transposed by 25 May 2011 and the precise means of notifying website users will depend on the implementation measures adopted by each individual Member State.

Based on the Opinion however it would appear that enhanced notification mechanisms may have to be adopted in the future. 

We will post further updates as they arise.
 

Justice Charleton hearing file sharing case

The much anticipated file sharing case EMI & Ors v UPC began this morning in the Commercial Court before Mr Justice Charleton. 

The choice of Judge is of interest to the case in light of his recent decision in the related EMI Records & Ors -v- Eircom Ltd case, where he approved the "three strikes" policy by Eircom (see previous entry) from a data protection perspective.

In these proceedings, he will address the substantive issue of whether UPC can be held accountable for illegal filseharing carried out by its subscribers. This landmark case is being closely watched by observers both at home and abroad - we will post on developments as they occur.

Landmark Decision for IT Suppliers - Pre-Contract Representations

The High Court in London has issued a landmark judgment in the long-running dispute between BSkyB and EDS.  BSkyB claimed in excess of £700m in damages from EDS alleging that EDS’s bid team made fraudulent misrepresentations and breached their contract in the manner in which they won and subsequently performed the contract to supply and install a customer relationship management system for BSkyB.  BSkyB ultimately claimed that EDS failed to deliver the system and as a result BSkyB had to develop the system in-house. The case is the first fraudulent misrepresentation case involving an IT project to proceed to the English Courts.

EDS argued that its maximum liability under the contract was capped at £30m. The High Court rejected this argument and held that EDS’s contractual cap on liability did not apply to damages arising as a result of deceit/fraudulent misrepresentation. BSkyB have said that they anticipate damages will be an amount of at least £200m as a result of the ruling.

Since the events in question EDS has been acquired by Hewlett Packard. Hewlett Packard issued a statement saying that “this is a legacy issue, dating back to the EDS business in 2000, which HP inherited when it acquired EDS in 2008.”

The case is likely to have significant implications for the IT services sector.  It will see suppliers exercising greater vigilance in the statements made by their contract bid teams and will make the assessment of potential risk under a contract more difficult.

Biometric Information: Striking a balance between security and privacy

In a recent report, the Irish Council for Bioethics has examined the ethical, social and legal issues associated with the collection and storage of biometric information (PDF).  The increase of identity theft has heightened the need for stronger identity verification systems many of which are based on the collection of biometric information that is unique to an individual (for example fingerprint, iris scans, etc.)  At the same time, the collection of this type of information has increased the risk of invasion of privacy and improper use of personal information.

... there must be a clear rationale to justify the necessity of using such biometric information.

The Council stated that while biometric technologies can enhance security and protect privacy, they can also have adverse implications for privacy.  The Council noted that it may be appropriate to override certain individual rights to benefit the common good, and it expressed concerns that this principle may be overused without justification. 

According to the Council, biometrics should be used as a proportionate response to the challenge at hand and that there must be a clear rationale to justify the necessity of using such biometric information.